A trustee in Chapter 7 proceedings is someone that manages the assets of the debtor (person filing for bankruptcy) in satisfying the debts owed to legitimate creditors.
How Is A Trustee Selected?Upon filing for Chapter 7, an interim, or temporary, trustee will be appointed by the United States trustee's office. The interim trustee will set up a 341 meeting, at which time a new trustee may be elected or, if a new trustee is not elected, the interim trustee will become the trustee for the case.
What Is The Process For Electing A New Trustee At A 341 Meeting?Creditors may elect a new trustee at the 341 meeting. In order for an election to be held, however, eliglible creditors holding at least twenty percent of the claimed amount owed by the debtor must request an election. "Eligible" creditors are those holding allowable, undisputed, fixed, liquidated, unsecured claims, who do not have an interest materially adverse to unsecured creditors. Basically, in order to vote, the claim must be a recognized debt, in a specific amount, owed by the debtor to the creditor without any guarantee of payment.
If there is a request by eligible voting creditors, then an election will be held and a new trustee will be chosen by a majority of the vote. If, however, there is no request, then the interim trustee will serve as trustee.
What Is The Role And Responsibilites Of The Trustee?The principal purpose of the trustee is to liquidate, or convert into cash, all the unexempt assets of the debtor to pay off creditors in order of priority. To accomplish this, the trustee has both statutory and administrative duties. Nonetheless, the trustee has certain powers at his disposal to be used in furtherance of his/her duties including the authority to use, sell, or lease property. Below are some of the powers of a trustee:
- taking possession of estate assets
- hiring professionals
- continuing the operation of the debtor's business
- selling assets
- investigation into the financial affairs of the debtor
What Happens If I Am Dissatisfied With A Trustee?Trustees may both sue and be sued. In addition, a trustee that is not a United States trustee, may be removed by the court for good cause after notice and a hearing.
If the a trustee resigns or the seat is vacated, a United States trustee will be appointed. Do I Need A Bankruptcy Attorney?Retaining a bankruptcy attorney is recommended as a lawyer will assist you in getting through the nuances and details of a Chapter 7 proceeding. |
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